Demand slows for mortgages

Homebuying declines for first time in a month

May 23, 2004|By Bloomberg News

An index of U.S. mortgage applications fell 12 percent last week as home purchases slowed for the first time in more than a month and loan refinancing dropped to the lowest level since early January.

The Mortgage Bankers Association said its gauge of loan demand fell to 654.1. It was the second straight decline in the index and was reported as 30-year mortgage rates exceeded 6 percent for a fourth consecutive week.

"The general trend is going to be continued weakness in refinancing, and purchases will probably hit a lower plateau and stay there," said Carl Steen, analyst at Maria Fiorini Ramirez Inc., a New York-based forecasting firm.

The group's home purchases index, which fell 8.1 percent to 454.2, is still close to the all-time high of 501.6 reached in January and far exceeds last year's average of 395.1. Rising mortgage costs are likely to cool the pace of homebuying, economists and builders say, though an accelerating economy and improving job prospects may limit the decline.

The average rate on a 30-year fixed mortgage was 6.3 percent last week. Rates last were above 6 percent for three weeks or more in August. Last year, the 30-year rate averaged 5.68 percent.

The purchase index last fell in the week that ended April 9.

The index of refinancing applications tumbled 17 percent to 1,816.9. The index hasn't been lower since it stood at 1,775.4 in the week that ended Jan. 2.

U.S. housing starts declined 2.1 percent last month as rain deterred some builders in the West, a government report found last week. Building permits rose 1.2 percent, suggesting that rising mortgage rates have yet to significantly cut demand for new homes.

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